Endogenous vs. Semi‐endogenous Growth in a Two‐R&D‐Sector Model

This paper contributes to the endogenous versus semi‐endogenous growth debate by establishing that semi‐endogenous growth is more general than endogenous growth in a two‐R&D‐sector growth model. It is demonstrated that endogenous growth requires two ‘knife‐edge’ conditions of parameters. This finding (i) is in sharp contrast to recent two‐R&D‐sector models that show that long‐run growth is endogenous, and (ii) resurrects the policy conclusion of semi‐endogenous growth that government policy is not effective in raising the underlying growth rate of an economy. The driving force of these results is knowledge spillovers between two R&D activities, which are largely neglected in existing studies.